Derailed

One of the central challenges facing Pakistan’s economy is the enormous cost of logistics within the country.

One of the central challenges facing Pakistan’s economy – even in non-flood ravaged times – is the enormous cost of logistics and transportation within the country. The poor infrastructure of roads in particular means that cities only a few miles apart have very little commerce between them owing to the high cost of transportation. So it is perhaps a more damaging blow than anyone realises when Pakistan Railways announces the closure of several lines owing to an inability to maintain them any longer. Last month, for instance, six train lines were closed down including some of the most iconic names in rail transportation such as the Shalimar and the Taiz Ro. The state-run rail sector, as a consequence, will save one billion rupees. We take railway officials at their word on that, though it is a shame that resources were not found to make those routes commercially viable.

It is not as though there is a lack of demand for transportation services, both for goods and people. Economists agree that the most critical factor in determining the volume of business between two locations is the effective distance between them, in a variation of the well-known gravitational model of trade. Such a distance can be significantly reduced simply by improving the transportation infrastructure between them. Unfortunately, the reason our rail infrastructure seems to be crumbling is that Pakistan Railways is one of the most grossly mismanaged state-owned enterprises. It manages to lose money despite being the sole provider of a service that the country desperately needs. The government’s solution so far has been to pursue a partial privatisation. But so far no buyers have been forthcoming, in part due to the severe encroachments on railway property.

Published in The Express Tribune, August 16^th, 2010.